Morrisons boss can leave with head held high and release the hand tied behind his back

It is tempting to speculate what David Potts, whose departure as Morrisons chief executive was announced today, might have achieved in the role had the grocer not been acquired by private equity owners at the end of 2021.

The £7bn takeover by Clayton Dubilier & Rice (CDR) loaded Morrisons with debt – taking its total borrowings to £6.6bn.

That left Morrisons fighting in one of the most competitive grocery markets in the world with one hand tied behind its back.

During the first full year after the takeover, Morrisons – which had made a profit of £201m in the last year before the deal – plunged to a loss of £1.5bn, dragged down by interest payments totalling £400m.

That was money which could have been invested in price cuts at a time when the two privately-owned German discounters, Aldi and Lidl, stepped up their assault on the UK market.

With no outside shareholders to satisfy, the pair have been able to plough millions into their UK expansion, cutting prices aggressively to such an extent that Lidl has just reported a pre-tax loss of £76m for the year to the end of February despite cranking up sales by 19% to £9.3bn.

It is, arguably, the key reason why Aldi has leapfrogged Morrisons to take the number four position in the UK market.

If it bothered Mr Potts, who left school at 16 and whose retailing career began working on the Tesco deli counter in his native Ashton-under-Lyne, he was too polite to say so.

That may be because the CDR bid was overseen by his mentor, the former Tesco chief executive Sir Terry Leahy, who promoted him to run the grocer’s Asian business in 2009.

But there is little doubt that operating with such a debt burden has handicapped Morrisons.

That said, the quietly-spoken Mr Potts deserves to be remembered as one of the UK grocery industry’s foremost figures of recent times.

Having been talent-spotted by Sir Terry’s predecessor Ian (now Lord) MacLaurin, he learned to handle responsibility at an early age, rising through Tesco’s ranks to the point where he was widely seen as one of the contenders to succeed Sir Terry when he left Tesco in 2011.

Mr Potts himself moved on soon afterwards but it was no surprise when, in February 2015, he was approached by the Morrisons chairman Andrew Higginson, a former chief financial officer at Tesco, to become chief executive at the Bradford-based company.

The business was in a bad way at the time. It had no presence in convenience, the fastest-growing part of the market at the time, no loyalty programme to speak of and was tied into a restrictive online partnership with Ocado, while Aldi and Lidl were already starting to gnaw away at its market share.

Mr Potts, a lifelong supporter of Manchester City, embarked on a turnaround and then navigated the business through the turmoil of the Brexit vote and then the pandemic. He also took Morrisons into convenience with the acquisition of McColls and expanded its loyalty programmes and digital presence.

That was achieving results: Morrisons was able to report today five consecutive quarters during which like-for-like sales have risen.

So the inheritance he bequeaths to his successor will be a good one – albeit one that would have been stronger had Morrisons not been loaded with extra debts.

That successor, Rami Baitiéh, comes with a formidable reputation of his own.

Having joined Carrefour, the French grocery giant, in 1995 he ascended the ranks to take on the role of chief executive of the company in June 2020 in its home and most important market – a market even more concentrated than that of the UK.

With the French grocery multiples having come under fire from Bruno Le Maire, the French finance minister, in recent months for not having done more to bear down on inflation, he is used to working in a politicised environment.

He is also used to duelling with Aldi and Lidl, both of which are starting to make the same inroads into the French grocery market that they did in the UK a decade ago – although in France it is Lidl, not Aldi, which has had the more aggressive opening programme.

Seeing off the threat of the discounters will be a key priority for Mr Baitiéh and it is instructive that the Morrisons board has plumped for someone with that experience to succeed Mr Potts.

He will also be expected to build on the work done by Mr Potts, chiefly in convenience, digital and loyalty.

Unlike Mr Potts, who had to put up with more than his fair share of bad luck, it could be that Mr Baitiéh is taking over when the tide is turning for Morrisons.

Not only are its sales beginning to improve, there is also confidence at Morrisons that consumer trends may move back in its favour. Aldi and Lidl have thrived during a cost of living crisis in which price is everything.

But there is growing optimism in Bradford that, as inflation starts to ease, the conversation in the grocery industry will eventually switch back to quality and provenance.

Aldi and Lidl have managed to build up a strong following among new customers during the last few years but one big advantage that the traditional ‘big four’ – Tesco, Sainsbury’s, Asda and Morrisons – have over them is a far wider assortment of items and lines – stock keeping units, or SKUs, in the industry jargon.

They are hoping that, once the cost of living crisis subsides, customers will again start to look for more choice.

Morrisons, with its strong reputation in fresh food and for producing its own meat and fish produce, will hope that such a change in consumer psychology will play to its strengths.

But Mr Baitiéh certainly has a tough act to follow.